It is the latest insurance giant to do so
Allstate has joined other major insurers with its decision to stop issuing new homeowners insurance policies in California.
Responding to inquiries from the San Francisco Chronicle, Allstate spokesperson Brittany Nash said the decision was driven by the escalating costs associated with insuring properties in the state.
“The cost to insure new home customers in California is far higher than the price they would pay for policies due to wildfires, higher costs for repairing homes, and higher reinsurance premiums,” Nash said, adding that Allstate is unable to quickly adjust prices due to state regulations.
Similar to Allstate, it cited concerns over rising construction costs, wildfire exposure and a “challenging reinsurance market.”
Rex Frazier, president of the Personal Insurance Federation of California, told the Chronicle that State Farm’s transparency in announcing underwriting actions was uncommon in the industry, as most insurers are not legally required to make such disclosures.
The only mandated disclosure for insurers scaling back eligibility in the state occurs when they seek rate increases from the California Department of Insurance, he added.
“The first step is making sure insurers can charge rates that reflect the increasing risk of loss,” said Mark Sektnan, APCIA’s vice president for state government relations. “The California Department of Insurance is working on this. Next, we need to allow admitted insurers to include the cost of reinsurance in their rates and use forward-looking probabilistic models to accurately assess future risk. Finally, we all have one common goal: mitigate properties and reduce the risk.”
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